Washington— Sen. Richard Blumenthal wants General Motors Co. to explain how it estimates that it will spend $400 million to $600 million to pay death and injury claims linked to its recall of 2.6 million older cars for ignition switch problems.
The Connecticut Democrat wrote GM CEO Mary Barra on Friday. He called on the Detroit automaker to release the basis for estimating that $400 million to $600 million will be paid to victims through the compensation fund administered by lawyer Ken Feinberg.
“Because the compensation protocol specifically allows for up to $1 million in non-economic damages for each person killed — and potentially much more in economic damages for those killed or injured — I am concerned that your estimated total undervalues the outstanding claims, particularly in light of your commitment not to cap the total amount of money available through the fund,” Blumenthal wrote. “There must be a factual basis on which you relied to arrive at this conclusion, as applicable securities laws require information provided to shareholders and the public to be truthful and accurate. Please provide more information about how you arrived at this estimate, which will allow investors to be more certain and victims to be more confident.”
On Thursday, GM chief financial officer Chuck Stevens declined to explain how GM arrived at the estimate in a meeting with reporters as part of GM’s second-quarter earnings release. Feinberg told The Detroit News that the estimate has no bearing on his review of claims that will begin once the fund starts accepting claims on Aug. 1.
Feinberg and GM both reiterated that there is no cap on total awards that the fund can make.
The estimate, Feinberg said, is “‘purely speculative,’ until I examine submitted claims and make appropriate determinations as to both eligibility and valuation.” The fund will accept claims through Dec. 31 and will take up to 180 days to review claims.
GM spokesman Greg Martin said the company would respond to directly to Blumenthal.
“Overall, Mr. Feinberg will ultimately determine the final number of eligible claims and the amount to be paid for each claim. He had no input into our estimate. Our estimate was based on all of the information available to us today and included the use of third party experts, such as actuaries. As we have repeatedly noted, programs of this nature are highly unusual and subject to significant uncertainties,” Martin said.
Some Wall Street advisers said the estimate was lower than they had expected.
Blumenthal said, “If this estimated total represents any intent by GM to seek to impose inflexible burdens of proof, utilize the bankruptcy shield from liability to deny victims a true choice, or otherwise seek to avoid making good on its moral obligation, then the compensation fund will unfortunately only be a continuation of the same type of avoidance of responsibility that brought about this problem in the first place.”